When Intelliflo got bought by Invesco last year, market watchers waited for its next moves with baited breath. That wait is over.
The size of Intelliflo’s ambitions didn’t disappoint last month as it revealed plans to launch a model portfolio service. It’s a game changer, bringing integrated investment solutions to the third of advisers whose eyeballs Intelliflo’s back-office technology already captures.
Maybe I misunderstood the mood music, but I recall Invesco saying its decision to buy Intelliflo wasn’t about pushing products. Specifically, it said: “We are not about to integrate Intelliflo into our distribution.”
The fact that half of the funds in some of the new models offered on Intelliflo by Invesco are Invesco’s own doesn’t really allay my fears that the deal was actually about distribution for the asset manager, and margin for Intelliflo.
Look at Intelliflo’s financials. Recurring revenue was up 22 per cent last year, and users were up 21 per cent. Did it need to enter the investment game? Couldn’t it have stuck to its knitting? It had decent profitability already – £4.8m profit on £20.5m of recurring revenue – albeit that’s nothing compared to what some asset managers report.
Modern life planners love Intelliflo for features including its dynamic fact-find tools. But those are expensive to build and probably don’t make much money on general subscription, even if they are arguably more important to the client experience than investment solutions. I fear that, on a pure profit basis, all that lovely development budget will go into investment-related updates, and not on core technology to help planners run better firms.
That your MPS is now integrated into your back-office is undoubtedly a compelling pitch in an era of time-pushed advisers. But I’d rather everyone was a bit more honest about why they’ve done it. All the talk at the time of the deal was about funding to take Intelliflo international. Can they really take an MPS global when investment and advice suitability rules vary so widely across the globe?
Yes, you’re cutting out unnecessary basis points taken by some platforms – a huge bonus. But, if you’re moving down this road, why doesn’t Intelliflo just become a platform and have done with it? Why not offer full product research and investment reporting tools, cashflow modelling, asset allocation and all the rest as bolt-ons?
The more fund managers join, the more Intelliflo starts to look like a platform anyway.
Just as when platforms get ideas above their station, I’m not sure back-office systems eating more of the value chain is necessarily a good thing. Given this is such a landmark deal, advisers mustn’t miss the opportunity to properly scrutinise it.